Tuesday, March 7, 2023

Snapping Some Streaks

By Connor Smith | Friday, March 3

Green Day. All 11 S&P 500 sectors rose today as the major indexes snapped their recent weekly losing streaks.

The Dow Jones Industrial Average rose 1.2%, or 1.8% on the week. The latter snapped a four-week losing streak. The S&P 500 rose 1.6%, or 1.9% on the week. It snapped a three-week skid of its own. The weakest S&P 500 sector of the day was consumer staples, which ticked up less than 0.1% higher.

The Nasdaq Composite rose nearly 2% to rise 2.6% on the week. It's risen in seven of the past nine weeks. 

The gains for tech stocks followed a slide in the 10-year Treasury yield to 3.966%. Growth-oriented stocks tend to fall when long-term rates rise because it lowers the value of future profits.

The shifts for stocks followed the ISM services index for February, which was down slightly from January to 55.1. Economists had expected it t clock in at 54.5, according to FactSet.

Oanda analyst Edward Moya caled the ISM reading impressive, noting it "suggests that part of the economy remains healthy." He also notes that traders are likely reacting to a trickle of commentary from Federal Reserve officials this week.

"Wall Street has had a lot of Fed speak to digest over the past week, but it seems clear that traders believe we are very close to the peak despite all these signs of a resilient economy," Moya writes.

Still, Barron's associate editor Randall Forsyth notes that the economy will face a tougher bar as February data rolls out. Randy writes:

Based on the data at hand, the economy continues to lumber ahead. But that might reflect monthly indicators that may be seasonally maladjusted. All of which makes the coming numbers for February perhaps more telling, especially for the Fed policy makers due to meet on March 21-22.

Randy points to next week's jobs report, where nonfarm payrolls are expected to rise by 215,000.

Absent a major negative shock, the Fed is likely to raise its fed-funds target range by another quarter percentage point later this month, from its current 4.50%-4.75%. More important will be whether the central bank raises its year-end expectation from December’s 5.1% median. Coming data may determine how things turn, turn, turn.

Watch our weekly TV show on Fox Business Saturday or Sunday at 10 a.m. or 11:30 a.m. ET. This week, NYU Stern's Aswath Damodaran on how to make sense of stock valuations as yields rise.

DJIA: +1.17% to 33,390.97
S&P 500: 
+1.61% to 4,045.64
Nasdaq: 
+1.97%  to 11,698.01

The Hot Stock: Communication Services +2.2%
The Biggest Loser: Hormel Foods 
+2.2%

Best Sector: Utilities +1.9%
Worst Sector: Consumer Staples 
+0.1%

A one-day chart of the major indexes.

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